allAfrica.com: Nigeria: Shell West Nigeria Output Drops By Extra 80,000 B/D

Vanguard (Lagos)
Posted to the web 1 January 2008
Yemie Adeoye
Lagos

THE west base operations of the Anglo Dutch Shell Petroleum Development Company (SPDC) which covers Delta State has suffered a drop of about 80,000 barrels per day in its maximum output, just as the company announces cost cutting measures to enable it remain afloat as the Niger Delta crisis takes toll on its operations.

An official of the organisation who spoke under condition of anonymity hinted that the company is experiencing a lull in its activities in Delta and Rivers states, where several of its installations had been vandalised and out of use.
 
From its one million barrel per day production capacity, Shell is said to be producing only half of the total output.

Vanguard gathered that Shell has closed virtually all its wells in the Niger Delta and now focuses on its offshore blocks to sustain its operations.

The offshore section reportedly accounts for 70 per cent of its output and revenue profile.

A senior official, who confirmed the restructuring exercise, said Shell introduced austere measures due to its poor finances, especially on the joint venture operations.

“We are operating a lean budget and at the same time repositioning for efficiency in future,” he said.

According to him, Shell is more interested in things that will deliver value for money. So, there is a wage freeze on some items, no hampers, no gifts, no end-of-year party,” he declared.

Giving details of the development, a source close to the company, said the crisis has made it difficult for Shell to meet some of its financial obligations.

He admitted that due to the shortfall in funds, the firm has told the employees not to expect the 2007 end-of -year party, which hitherto was a yearly event, The company recently merged some services among its subsidiaries in Nigeria as well as the organisational structure to reflect the cost-reduction drive.

Besides, the source said that some of the company’s contract workers, such as cleaners and drivers at its Warri, Delta State office recently embarked on a strike to protest what they called the late payment of certain welfare packages.

He said that the multinational noted for its undergraduate and graduate training programmes in oil and gas-related fields has been having problems paying the allowances of the beneficiaries at its Warri training school.

The students, according to him, no longer get their stipends as at when due as the money comes two weeks into the new month.

“Most of the wells and flow stations the company has in Delta State, which falls under Shell West have been lying fallow due to the crisis in the Niger Delta, which translates into losing about 500,000 barrels of oil daily.”

“This is about 50 per cent of the one million barrels Shell is expected to produce daily, but Shell

West is just struggling to produce between 75,000 to 80,000 barrels per day.

The situation is not different in the Eastern operations, which falls under Port Harcourt as the issue of militancy is equally affecting its operations there.

The only place Shell is working at full capacity now is offshore that is, products from the FPSO “Bonga,” which is now responsible for 70 per cent of Shell’s output.

Production from this alone can’t cover the cost of running the company thereby making meeting some financial obligations difficult for it.

“In fact, due to this financial stress, the Managing Director said Shell would not be able to organise this year’s end of year party for the workers,” the source said.

He further explained that the issue of vandalism was also part of the constraints the company is facing as it had been spending so much to repair damaged lines since the crisis in the region escalated.

Besides, the source said the estimated cost of its re-entry programme into most of its abandoned sites was eating deep into the company’s finances.

He was however optimistic that Shell would be back on its feet by the second quarter of next year.

“Shell is presently trying to correct some anomalies in its operations vis-à-vis its relationships with host communities and it is expected that things would get better after all these corrections are made.

For instance, Shell has signed a cease-fire accord with some of the militant groups and also embarked on community relations drive to ensure that it helps train people from such areas.

“If things work out as planned, Shell should be able to find its feet in the country by second quarter of next year,” he stressed.

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